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Modelling stock volatilities during financial crises: A time varying coefficient approach

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Modelling stock volatilities during financial crises : A time varying coefficient approach. / Karanasos, Menelaos; Paraskevopoulos, Alexandros; Menla Ali, Faek; Karoglou, Michail; Yfanti, Stavroula.

In: Journal of Empirical Finance, Vol. 29, 12.2014, p. 113-128.

Research output: Contribution to journalJournal article

Harvard

Karanasos, M, Paraskevopoulos, A, Menla Ali, F, Karoglou, M & Yfanti, S 2014, 'Modelling stock volatilities during financial crises: A time varying coefficient approach', Journal of Empirical Finance, vol. 29, pp. 113-128. https://doi.org/10.1016/j.jempfin.2014.08.002

APA

Karanasos, M., Paraskevopoulos, A., Menla Ali, F., Karoglou, M., & Yfanti, S. (2014). Modelling stock volatilities during financial crises: A time varying coefficient approach. Journal of Empirical Finance, 29, 113-128. https://doi.org/10.1016/j.jempfin.2014.08.002

Vancouver

Karanasos M, Paraskevopoulos A, Menla Ali F, Karoglou M, Yfanti S. Modelling stock volatilities during financial crises: A time varying coefficient approach. Journal of Empirical Finance. 2014 Dec;29:113-128. https://doi.org/10.1016/j.jempfin.2014.08.002

Author

Karanasos, Menelaos ; Paraskevopoulos, Alexandros ; Menla Ali, Faek ; Karoglou, Michail ; Yfanti, Stavroula. / Modelling stock volatilities during financial crises : A time varying coefficient approach. In: Journal of Empirical Finance. 2014 ; Vol. 29. pp. 113-128.

Bibtex

@article{c32273de827f4dbe828f2230937173d4,
title = "Modelling stock volatilities during financial crises: A time varying coefficient approach",
abstract = "We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the volatility dynamics, including the underlying volatility persistence and volatility spillover structure. Using daily data from several key stock market indices, the results of our bivariate GARCH models show the existence of time varying correlations as well as time varying shock and volatility spillovers between the returns of FTSE and DAX, and those of NIKKEI and Hang Seng, which became more prominent during the recent financial crisis. Our theoretical considerations on the time varying model which provides the platform upon which we integrate our multifaceted empirical approaches are also of independent interest. In particular, we provide the general solution for time varying asymmetric GARCH specifications, which is a long standing research topic. This enables us to characterize these models by deriving, first, their multistep ahead predictors, second, the first two time varying unconditional moments, and third, their covariance structure.",
keywords = "Financial crisis, Time varying GARCH models, Structural breaks, Volatility spillovers",
author = "Menelaos Karanasos and Alexandros Paraskevopoulos and {Menla Ali}, Faek and Michail Karoglou and Stavroula Yfanti",
year = "2014",
month = dec,
doi = "10.1016/j.jempfin.2014.08.002",
language = "English",
volume = "29",
pages = "113--128",
journal = "Journal of Empirical Finance",
issn = "0927-5398",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Modelling stock volatilities during financial crises

T2 - A time varying coefficient approach

AU - Karanasos, Menelaos

AU - Paraskevopoulos, Alexandros

AU - Menla Ali, Faek

AU - Karoglou, Michail

AU - Yfanti, Stavroula

PY - 2014/12

Y1 - 2014/12

N2 - We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the volatility dynamics, including the underlying volatility persistence and volatility spillover structure. Using daily data from several key stock market indices, the results of our bivariate GARCH models show the existence of time varying correlations as well as time varying shock and volatility spillovers between the returns of FTSE and DAX, and those of NIKKEI and Hang Seng, which became more prominent during the recent financial crisis. Our theoretical considerations on the time varying model which provides the platform upon which we integrate our multifaceted empirical approaches are also of independent interest. In particular, we provide the general solution for time varying asymmetric GARCH specifications, which is a long standing research topic. This enables us to characterize these models by deriving, first, their multistep ahead predictors, second, the first two time varying unconditional moments, and third, their covariance structure.

AB - We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the volatility dynamics, including the underlying volatility persistence and volatility spillover structure. Using daily data from several key stock market indices, the results of our bivariate GARCH models show the existence of time varying correlations as well as time varying shock and volatility spillovers between the returns of FTSE and DAX, and those of NIKKEI and Hang Seng, which became more prominent during the recent financial crisis. Our theoretical considerations on the time varying model which provides the platform upon which we integrate our multifaceted empirical approaches are also of independent interest. In particular, we provide the general solution for time varying asymmetric GARCH specifications, which is a long standing research topic. This enables us to characterize these models by deriving, first, their multistep ahead predictors, second, the first two time varying unconditional moments, and third, their covariance structure.

KW - Financial crisis

KW - Time varying GARCH models

KW - Structural breaks

KW - Volatility spillovers

U2 - 10.1016/j.jempfin.2014.08.002

DO - 10.1016/j.jempfin.2014.08.002

M3 - Journal article

VL - 29

SP - 113

EP - 128

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

SN - 0927-5398

ER -